Cushman & Wakefield paints bleak picture for Manhattan office market
Low occupancy and surging sublease space make for “radically tenant-friendly” market
Statistics on the Manhattan office market’s dismal third quarter continue to roll in, and the situation for landlords remains grim.
Commercial brokerage Cushman & Wakefield recently summed up some of the key data points in a message to its clients, Seeking Alpha reported: Occupancy is still below 15 percent, leasing is down almost 50 percent year-over-year, and sublease space has surged to account for a quarter of all space on the market.
“As you can imagine, there have been significant changes to the real estate market,” the note stated. “We are now experiencing a radically tenant-friendly market and softening of pricing while concessions (improvement allowance and free rent) are soaring.”
The brokerage’s latest Manhattan office report, published last week, provides more analysis around these figures. Per the report, the borough’s overall vacancy rate rose to a 24-year high of 13.3 percent, in part thanks to the completion of SL Green’s One Vanderbilt, which added 625,000 square feet of vacant space to the market. Thirteen other blocks of 100,000 or more square feet also hit the market in the third quarter.
Cushman & Wakefield sees the vacancy rate rising further in the coming year, with net absorption and asking rents trending downward. Rent declines, however, have been “minimal” so far, in part thanks to One Vanderbilt’s higher-priced space boosting the overall average.
“An additional 2.8 [million square feet] of ‘shadow’ sublease space being tracked could potentially lead to a more substantial increase in vacancy as it enters the market more rapidly in 2021,” the report notes.
Meanwhile, after bottoming out in May, employment has started to recover in recent months, albeit quite slowly.
“Until there is a public health resolution to the pandemic, the recovery is likely to remain uncertain and gradual,” the report states. “Only then can households and businesses become more confident.” [Seeking Alpha] — Kevin Sun